Wednesday, October 27, 2010

Barclays in Ghana, Seychelles - and Botswana

We have blogged a few times about the efforts of Barclays Bank to encourage and set up offshore banking in Ghana, amid a highly corrupted region in the throes of a gigantic oil boom. The prospect for illicit leakage is tremendous.

We are bound by our confidentially agreement with our clients,' disclosed a Barclays official based in the Seychelles. 'No other branches can access our client details.'

Barclays Bank again. The article continues:

Closer to home, Bostwana's lack foreign exchange controls has rendered the country 'the Switzerland of Africa' facilitating easy transfer and repatriation of laundered profits. The country's International Financial Services Centre (IFSC), structured after that of Dublin's, was created in 2003 to 'facilitate cross-border financial services ie: the Hoover effect, sucking up illicit flight from neighboring regions, including SA.

'We do not intend to ruin our international reputation by embracing practices which place us in the category of a tax haven', declared the IFSC, established with the intention of competing with another tax haven, Mauritius. But Botswana's IFSC allows for foreign clients to escape withholding and capital gains tax, while accessing a 15% corporate tax rate that may be circumvented using a selection of services available including the age old trick of mispricing. Though SA provides secrecy vehicles such as trusts, the proximity of the IFSC, allegedly shaped, as in Ghana, by foreign banks such as Barclays, does not bode well. The IFSC's CEO himself is an old Barclays hand.

The country's IFSC is one of only three in the world and Botswana offers one of the world's lowest tax rates. One client, Zimre Holdings Ltd, a Zimbabwean investment and insurance entity keen to engage in 'oil, gas and other energy forms in Africa, especially Angola'. The company, only recently delisted from sanctions by the EU, is almost 70% controlled by the government of Zimbabwe.

We haven't yet written too much about Botswana, though it's been on our radar screen for a little while. Seeing the name Barclays for a third time makes us see something of a pattern here. Tax havens can serve as conduits for financial flows into nearby jurisdictions. But in our experience, especially with developing countries, they are far more important as conduits for capital flowing out. Are we seeing a pattern here of the City of London seeking to muscle in on hoovering up yet more dirty money from Africa? With Ghana to hoover it up from the oil-rich west African subregion, with Botswana for South Africa, Zimbabwe and the rest of southern Africa, and the Seychelles (and Mauritius) for the continent as a whole? It does look a bit like that.

The review of Botswana’s legal and regulatory framework reveals a number of serious deficiencies which, taken together, make it impossible for Botswana to engage in effective exchange of information in tax matters. These are:

Nominees – while Botswana’s rules regarding the availability of ownership information are generally adequate regarding legal ownership, there is no provision to ensure that beneficial ownership information is available where the legal owner holds an interest on behalf of another person.

Bank Secrecy – bank information can only be obtained where relevant to a civil or criminal proceeding taking place in Botswana.

Inadequate confidentiality rules – information held by Botswana’s tax authorities can be disclosed in a number of different circumstances beyond those prescribed by international standards.

Lack of exchange of information agreements – Botswana only has one agreement in place that appears to provide for effective exchange of information in tax matters.

And that is the OECD's assessment. The OECD's standards are, as we have repeatedly pointed out, risibly low. So Botswana's standards must be really very low indeed. This is a very new tax haven, and it should be cause for very great concern.

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The Tax Justice Network (TJN) is an international, non-aligned network of researchers and activists with a shared concern about the harmful impacts of tax avoidance, tax competition and tax havens.
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